Decision to sell Jabong to Myntra was based on preference to receive cash: Kinnevik CEO Lorenzo Grabau

Grabau said Indian competitive dynamics have changed significantly in last couple of years with large investments by Amazon, Flipkart, Snapdeal and others.Binoy Prabhakar | ET Bureau | July 29, 2016, 08:19 IST

"The price achieved was the result of an evaluation of a number of options available," Grabau said by email through a spokesperson.NEW DELHI: The surprise decision by Global Fashion Group, holding company of Jabong, to sell the online fashion retailer to rival Myntra was based on a preference to receive cash, GFG’s principal investor has said.

"It reflects our preference to receive cash proceeds that can be reinvested in other GFG businesses," Lorenzo Grabau, CEO of Swedish investment company Kinnevik AB, said on Thursday. Kinnevik is the largest shareholder of GFG with 26 per cent stake, which was created by combining six online fashion retailers operating in emerging countries including Jabong. The other big investor in GFG is Germany’s Rocket Internet.

Myntra, a unit of India's biggest ecommerce company Flipkart, had pipped frontrunners such as Snapdeal and Future Group to snap up Jabong for $70 million on Tuesday.

Retail analysts said Jabong was sold at a steep discount, given that the company was valued between $500 million and $1 billion not long ago. "The price achieved was the result of an evaluation of a number of options available," Grabau said by email through a spokesperson.

Competition in Indian ecommerce has intensified in recent months, sobering the once giddy valuations of several companies. In Jabong’s case, continuous loss of market share, severe funding crunch and recurring leadership troubles have all weighed heavily on the company’s valuation.

Grabau’s comments, the first public reaction from Kinnevik since the deal was sealed, reinforces this view.

He said the Indian competitive dynamics have changed significantly in the last couple of years with large investments by Amazon, Flipkart, Snapdeal and a number of other online and offline competitors.

"Within that context, the GFG board concluded Jabong’s position as India’s leading fashion ecommerce destination would be best served through a business combination with a local player. Having reviewed multiple options over several months, the board has resolved to sell Jabong to Flipkart Group," he said.

With the conclusion of the Jabong sale, online classifieds platform Quikr is the only asset that Kinnevik remains invested in India, where it has invested 2 per cent of its $8 billion assets. It holds 19 per cent stake in Quikr.

Grabau denied media reports that GFG stopped pumping money into Jabong once the company began losing its sheen. "GFG continued to invest into Jabong throughout its ownership," he said.

He said the Indian market remains attractive and that Kinnevik believes in the long term macro-economic opportunity. "Kinnevik continues to consider India an exciting market for digital consumer businesses and we look forward to contribute to the success of Quikr as well as to evaluate new opportunities within our targeted sectors," Grabau said.

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